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This statement contains a grain of truth. A profit- seeking entrepreneur will not undertake a project knowing the costs can’t be covered. However, the statement fails to emphasize (1)the time dimension of the production process and (2) the uncertainty associated with business decisions. The production process takes time. Raw materials must be purchased, employees hired, and plants equipped. Retailers must contract with suppliers. As these decisions are made costs result. Many of the firm’s costs of production are incurred long before its product is ready for marketing.
Even a good business maker is not always able to predict the future because market conditions can change quickly and unexpectedly. At the time the product is ready for sale, buyers might be unwilling to pay a price that will cover the seller’s past costs of production. These past costs, however, are now sunk costs and no longer relevant. Decisions must now be made on the basis of the firm’s current cost and revenues.
Should a grocer refuse to sell oranges that are about to spoil because their wholesale cost cannot be covered? The grocer’s current opportunity cost of selling the or angles at this point is nearly zero. The alternative would be to throw them In the garbage next week. Almost any price, even one far below past costs, will be the oranges spoil.
Consider another example. Suppose a couple who owns a house  plans to relocate temporarily. Should they refuse to rent the house they‘re m n g out of for $500 (if this is the best offer available) because their monthly house payment IS $8007 Of course not. The house payment will go on, regardless of Wether or not they rent the house. If the homeowners can cover their opportunity costs (perhaps wear and tear plus a $60 monthly fee for a property management service), they will gain by renting rather  leaving the house vacant.
Past mistakes provide useful lessons for the future. but they cannot be reversed. Bygones are bygones. Even if they resulted in business loss. There is no need to fret overspilt milk, burnt toast, or yesterday’s business losses.

Economic theory explains why, at least initially, larger firms have lower unit costs than comparable smaller firms. Declining unit costs mean that economies of scale are present over the initial range of outputs. The long-run ATC curve is falling.
What about diseconomies of scale?As output continues to expand, is there reason to believe that larger firms will eventually have higher average total costs than smaller ones? The underlying causes of diseconomies of scale are less obvious, but they do occur. As a firm gets bigger and bigger, beyond some point bureaucratic inefficiencies may result. Inflexible procedures tend to replace managerial genius. Innovation requires clearance from more levels of management and becomes more difficult and costly. Motivating the work- force, carrying out managerial directives, and monitoring results of plans are also more complex when the firm is larger, and principal-agent problems grow as the number of employees increases and more levels of communication and monitoring are needed.
Circumstances vary, so diseconomies of scale set in at lower levels of firm size for some kinds of firms than for others. For example, firms in the fast-food industry can be very large and remain efficient; economies of scale apparently outweigh the diseconomies, even for giants like McDonald’s. But in the fine-dining segment of the restaurant industry, the best restaurants seem to be small. Customers demand individual attention, and a constantly changing, innovative menu that takes advantage of the constantly changing array of locally available fresh ingredients, with consistently high quality as the only constant, is important. There are few truly gourmet restaurant chains because diseconomies seem to set in at a much smaller size at these firms. The bottom line for diseconomies of scale is this: for some firms, bureaucratic inefficiencies, principal- agent problems, difficulties with innovation, and similar problems that increase with firm size cause long-run average total costs to rise beyond some output level. However. there is considerable variation among industries and even among firms in the same industry concerning the precise output level at which diseconomies of scale begin to occur .
It is important to note that scale economies and diseconomies stem from sources different from those of increasing and diminishing returns. Economies and diseconomies of scale are long-run concepts. They relate to coriditioris of prodiictiori when all factors are variable. In contrast, increasing and diminishing returns are short-run concepts, applicable only when the firm has at least one fixed factor of production.